by Fausta Rodriguez Wertz | March 19th, 2014
by Fausta Rodríguez Wertz
Lefties firmly believe the deceased Hugo Chavez “improved the economy drastically and ameliorated poverty drastically” because GDP went up, and fewer people were living below the poverty line by the time he died last year.
The numbers are there: GDP did go up, and yes, fewer people were listed as living below the poverty line. Whose numbers?
The numbers came from the Venezuelan government.
The International Monetary Fund keeps a List of IMF Member Countries with Delays in Completion of Article IV Consultations or Mandatory Financial Stability Assessments Over 18 Months. As of the writing of this post, Venezuela hasn’t held an Article IV consultation with the IMF in 99 months.
Let me translate that into plain English: The Venezuelan government has not allowed its own numbers to be verified for almost a decade.
Heavy government spending has fueled rampant inflation, which averaged an annual 22% during Mr. Chávez’s tenure. Its anticapitalist rhetoric and broad state intervention into the economy have led to a dearth of investment. Gross fixed capital formation declined to 18% of gross domestic product in 2011, from 24% in 1999, according to the World Bank. Net inflows of foreign direct investment stood at 2.9% of GDP during that same year, his first in office, nearly double the 1.7% in 2011. Capital flight from Venezuela intensified as Mr. Chávez pursued more interventionist policies, including capital controls and a fixed official exchange rate that — if you can get it — offers dollars at a quarter of the exchange rate that the greenback fetches in the black market. Stock market capitalization of companies listed on the Caracas Stock Exchange has gone from a paltry 7.6% of GDP in 1999 to a minuscule 1.6%.
Rather than pursue policies that might stimulate investment, the government’s response to shrinking productive capacity and high inflation has been price caps. The result? Shortages of food and other basic necessities, periodic electric brown- and blackouts, and far fewer jobs: the labor force participation rate has dropped from 52% to 46% in the Chávez era.
Does that sound like a “drastically improved” economy?
But let’s look at GDP some more, with the numbers that are available: Chavez made the Venezuelan economy increasingly dependent on oil exports. In 1999, oil accounted for 80% of all exports. Back then the Annual Average Domestic Crude Oil Price (AADCOP) was $16.56. By the time of his death last year, the number had risen to 95% at an AADCOP of $91.17. GDP had to go up, if only because all the eggs in that one basket got pricier; even then Chavez didn’t do all that well:
There was strong economic growth from 2004 to 2008 but GDP fell in 1999, 2002, 2003, 2009 and 2010. From the time Chávez took office in 1999 to 2011 Venezuela’s economy grew by an average of 2.8% per year. During this same period Latin America as a whole grew by 3.3% per year and Brazil grew by 3.4% per year.
While Venezuela’s oil production decreases, Cuba still receives 100,000 barrels of its oil per day.
How about reducing poverty?
According to the UN’s Economic Commission for Latin America, the percentage of the population living under the poverty line in Venezuela fell from 49.4% in 1999 to 27.8% in 2010. That is a pretty good record but there were similar trends across Latin America. In the region as a whole poverty dropped from 43.8% in 1999 to 31.8% in 2010. A few countries, like Peru, Brazil and Panama, faired even better than Venezuela. Poverty rates in Peru dropped sharply from 54.7% in 2000 to 31.3% in 2010—all three have solidly capitalistic economies.
There are no verifiable data available on income distribution, but again, according to government numbers
The country now boasts the fairest income distribution in Latin America, as measured by the Gini coefficient index.
In 2011, Venezuela’s Gini coefficient fell to 0.39. By way of comparison, Brazil’s was 0.52, in itself a historic low.
So every Venezuelan now has a more equal slice of the cake. The trouble is, that cake has not been getting much bigger.
“Venezuela is the fifth largest economy in Latin America, but during the last decade, it’s been the worst performer in GDP per capita growth,” says Arturo Franco of the Center for International Development at Harvard University.
The Gini numbers do not include moneys kept by corrupt officials or “Tier II Kingpins” drug lord Cabinet members.
Venezuela ranks 181 out of 189 in the World Bank Economy Rankings.
Chavez’s true legacy is a ruined country with murder rates doubling or tripling over a decade, Communist control of all institutions and media, falling oil production, crumbling infrastructure, a moribund private sector (what little is left of it after the expropriations and nationalizations), soaring inflation, fleeing capital, power outages and food shortages, and now, electronic food rationing cards.
Drastically, yes. Improved, no.
Fausta Rodríguez Wertz writes on Latin American and US politics and culture at Fausta’s Blog.
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